Operations Management

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Strategically, operations management involves the long-term planning and structuring of work. Indeed, the task of operations strategy is to design the operating system, which is the joint configuration of resources and processes, such that its resulting competencies are aligned with the organization’s desired competitive position. In other words, operations strategy focuses on how to best enable and implement the organization’s strategy. (For for-profit organizations, “best” can be measured as maximizing the net present value of profits. For not-for-profits, it could mean minimizing cost subject to strategically specified constraints on quality, time, flexibility, and other non-financial metrics.) Tactically, operations management involves the near-term planning and coordination of work. Its task is to utilize the operating system and provide the best match of supply with demand. Organizations that take the design of their operations seriously and better match supply with demand will gain a significant competitive advantage over their rivals, according to Cachon and Terwiesch (2006). In the remainder I will describe the typical operational decisions involved in designing an operations system and a framework to guide operational decision making. The Resource View of Operations and Resource Decisions

To coordinate and perform their activities, organizations need a wide variety of resources, which are the means or the real assets needed to perform the activities. The resource view considers any organization (or any of its parts) as a bundle of real assets. Resources or real assets are divided into two groups: tangible and intangible. Tangible real assets are human resources (people) and capital assets (property, plant and equipment as shown on the balance sheet). Intangible assets include relationships with suppliers or customers, intellectual property, reputation and brands, and knowledge and experience in processing, technologies, and markets. Often, tangible...
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